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More lenders cut fixed rates and up-date product criteria

Virgin Money and Accord Mortgages reduce rates on fixed and remortgage products, while a new study reveals that less than half of lenders have passed on the Bank of England’s Bank Rate cut to their Standard Variable Rate (SVR) customers.

Virgin Money has cut the rates on a selection of its fixed rate loans. It is offering a five-year fixed rate ta 1.99%(3.53% APRC) and a two-year fixed rate loan at 1.44% (4% APRC) on residential mortgages up to 65% loan to value (LTV). Both deals carry a £995 arrangement fee.

Other new deals include a two-year fixed rate buy to let mortgage at 2.19%(5.5% APR) up to 75% LTV, which comes with a £1,995 fee and £500 cashback for purchase and remortgage customers.

The lender is also revising its Help-to-Buy Guarantee product range and is offering £500 cashback on certain buy to let purchase and remortgage products.

Intermediary-only lender, Accord Mortgages, has reduced rates for remortgaging customers by up to 0.15%.

The reductions have been applied across the lender’s 65%, 75%, 80% and 85% LTV range and are offered with a range of incentives.

Homeowners with 25% deposit will be able to access a two year fixed rate mortgage at 1.44% and a two-year fixed 65% LTV mortgage is available at 1.34%. Both come with a £845 fee, and free standard valuation and standard legal fees.

Interbay’s Medium and Heavy Refurbishment Loans are now subject to a maximum LTV of 65%, exclusive of interest roll-up, and 70%, inclusive of interest roll-up. While Kent Reliance has stated that loan sizes of less than £100,000 will be subject to a maximum LTV of 75%.

Both Interbay and Kent Reliance now require a Long Form Valuation where LTV exceeds 50% for any property with a Market Value in excess of £2m and they have also both amended the validity period of valuation reports from six months to four months.

In addition, Interbay has announced that LTVs for all loans, including on Commercial and Semi-Commercial property, will be based on the lower of vacant possession value, investment value or purchase price.

These reductions to fixed rates and changes to criteria come about as new analysis from Moneyfacts.co.uk reveals that less than half of lenders have passed on the Bank of England rate cut to their SVR borrowers.

The research shows that many lenders actually put up the price of variable rates on offer to new borrowers, in anticipation of the base rate cut.

In doing so, lenders then reduced the rates following the base rate cut, as if they were responding to the Bank of England’s decision, but in reality customers would not have been making any real savings.

Average rates, as compiled by Moneyfacts.co.uk on 1 September

Average Rates

1st August

Today

Standard Variable Rate (SVR)

4.80%

4.71%

Two-year tracker

2.13%

1.94%

Lifetime tracker

2.98%

2.74%

Two-year fixed

2.48%

2.45%

Source: Moneyfacts.co.uk Compiled: 01.09.2016

Finance expert at Moneyfacts, Charlotte Nelson explains that given the uncertain future for the economy, some lenders are still quite cautious in their reaction to the Bank’s interest rate decision, with many choosing to wait and see to ensure they get the timing right.

She said:

“Whilst the picture for borrowers isn’t bleak, it is definitely a mixed bag. Borrowers would have assumed that a 0.25 per cent cut in base rate would make them financially better off, particularly if they were on a variable rate.

“However, this is unfortunately not the case, with just under half of providers failing to pass this cut on to their Standard Variable Rate (SVR) customers.”

Nelson goes on to advise that with rates at all-time lows, SVR borrowers would still be better off opting for a fixed rate. Basing her example on a £200,000 mortgage over a 25-year term on a capital and interest repayment basis, Nelson said that borrowers would be £243.03 a month better off based on the average two-year fixed rate at 2.46% compared to the average SVR of 4.71%.

She added: “The average two-year tracker rate has been reduced by 0.19%, so borrowers looking for this type of deal would have seen a better picture.

“However, shockingly some providers, preempting the announcement, chose to increase their variable rate products, meaning the reductions have been offset.

“To illustrate this, at the start of July the average two-year variable tracker rate stood at 2.01 per cent. This had increased by 0.12 per cent on August 1, therefore reducing the effect of the reduction in the month of August to 0.07 per cent in real terms.

“As rumours start to build about a second reduction to base rate and mortgages are falling to record lows yet again, borrowers and providers alike are questioning how low these deals will actually go.”